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Question 1

What is a contra revenue account?

Answer 1

A contra revenue account is used to record reductions in revenue.

Examples include Sales Discounts and Sales Returns and Allowances.

Question 2

What are Sales Discounts?

Answer 2

Sales Discounts are reductions in the amount of revenue recognized from sales due to early payment or promotional offers.

Question 3

What are Sales Returns and Allowances?

Answer 3

Sales Returns and Allowances are reductions in revenue due to returned goods or allowances granted to customers.

Question 4

What is required for recording sales transactions in a perpetual accounting system?

Answer 4

Each sales transaction requires two entries:
1. Revenue entry (Dr. cash or A/p, cr. Sales)
2. Expense entry (Dr. COGS; cr. inventory)